As Ross Fubini told us in the last Braintrust, the Big Banks are not static targets. But it feels as though during the last decade, much of their innovation has come in direct response to the threat of burgeoning FinTechs. Startups like PayPal, RobinHood and SoFi have created new ways for consumers to bank and then bits of those services have been adopted by the larger institutions.

Ehab Bandar, a 20-year veteran of Silicon Valley, believes that it’s a structural issue that’s kept the Big Banks from being true innovators. He’s worked with startups as well as some of the biggest incumbents in the financial space (Wells Fargo, Citi, and Charles Schwab) and has seen the differences between them. In Bandar’s mind, there are people at the Big Banks with big ideas, but they rarely have the chance to deliver them to their customers in an organic and timely manner.

We talked with Bandar about the innovation gap between the incumbents and FinTech, and what might spark the next big thing in banking.

Unifimoney: You’ve argued that Big Banks have become too complex to innovate. Can you explain what you mean?

Ehab Bandar: Sure. If you look at a typical bank, like a Wells Fargo or a Citi Bank or a Chase, they’re going to both have legacy systems, as well as a myriad of different products. If you’re trying to create a technology solution that’s going to address all those needs, then all those various groups have to be involved in the process. It ends up creating a situation where you’re developing technology for the common denominator. It takes way longer to build and, by that time, the environment has changed. You can’t be as agile as you’d like. That’s the core issue with Big Banks: their inability to develop the right solutions at the right speed.

Unifimoney: Is part of the problem too many cooks in the kitchen?

Bandar: There are a lot of cooks in the kitchen, and the cooks that really know what to build are usually either at the front lines or too low in the hierarchy of a traditional bank. Their voices never quite carry the same weight, so you have this top-down directive to build something and very often those driving the ship don’t have an understanding of the real impact to the end user. So, you have this very stark disconnect between what the customers need and what the business thinks they need.

Unifimoney: This last decade has seen both the rise of FinTech and the response from the Big Banks. Do you view the technology and innovation within the Big Banks to be a direct result of the threat from FinTech?

Bandar: I was involved pre-launch at Mint.com when they were tackling a very narrow sliver of the problem. Years later, I was consulting with banks and their solution was a copycat and a watered-down version of what Mint was five years prior. So, especially from the consumer PFM space, I think they’re way behind. In a way, the banks have almost given up in even trying to tackle that problem. And in peer-to-peer, competing with PayPal, they’ve organized around Zelle and the adoption of this sort of copycat, high-friction-for-the-user version. They’ve just been lapped by the Venmos of the world and by the Squares of the world. So, I don’t see a lot of progress in the innovation space.

Unifimoney: In their current structure, can the Big Banks become innovative institutions or will the big innovation in the banking sector have to come from the outside?

Bandar: I think they are capable of it. What’s holding them back is not the ideation and the inspiration; it’s the ability to take a big risk and to experiment. A startup could get away with creating multiple versions of something for a small group and make those mistakes that you need to innovate. The banks often don’t have that luxury. But I am seeing instances of them taking smaller chances and doing a lot more user research. I think they have the people, but it takes the right leader to make the call and to empower them with the right resources and the right tools.

Unifimoney: If you had to guess, what will be the spark that creates an innovation that will substantially alter the way the average consumer banks?

Bandar: What we’re currently going through is introducing some interesting use cases in relation to the typical reliance on a retail branch and how banks think about their more complex transactions: in terms of small businesses and in terms of more advanced products or services. You’re going to start seeing them trying to adapt to the models where a consumer or small business owner is not asked to come into the physical branch. That’s going to completely shift their mode. They’re going to have to go beyond online banking to more of an advisory setup and I think this could be a spark. The longer we’re in a pandemic mode, the more it will push Big Banks into creating different, more technology-based relationships with customers.